Key Points
Even after the July swoon, Nebius stock is still higher by 125% this year.
A capital raise reminds investors its about more than just revenue growth.
Artificial intelligence (AI) cloud infrastructure provider Nebius Group (NASDAQ: NBIS) has been a strong stock this year. Shares have more than doubled, but some shareholders locked in those gains last month.
Nebius stock plunged 31.1% in July, according to data provided by S&P Global Market Intelligence. That begs the question of whether now's the time to jump in, hoping for big gains ahead. Looking at the numbers suggests investors should remain cautious, though.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: The Motley Fool.
Exploding revenue
There's no doubt that data center compute capacity is in high demand, and Nebius has it. That helps explain why first-quarter revenue soared from about $50 million in 2025 to $400 million this year. The company still has massive expansion plans, too.
In the most recent earnings report in May, the company announced another increase in its projections for contracted power capacity, aimed at bolstering its data centers that supply cloud computing infrastructure essential for the advancement and expansion of AI models.
Since last August, these projections have increased significantly from a minimum of 1 gigawatt (GW) to over 4 GW. Nebius revealed it had already secured up to 1.2 GW of power and land for an AI factory at a new site in Pennsylvania. Nebius reports Q2 results on Wednesday, Aug. 12, giving investors greater visibility into its business pipeline and compute capacity growth.
Nebius' growth explains why the stock has soared 125% this year, even after the July pullback.
Growth costs money
In mid-July, the company announced it would raise $775 million in debt financing to help support its growth. That was in addition to the $6.3 billion raised in the first quarter, which included a $2 billion equity investment from tech giant Nvidia and $4.3 billion from convertible securities.
More and more companies will be using AI, meaning demand for cloud compute capacity is strong. Expanding capacity means investing in the growth of Nebius' AI cloud business. Management said rising co-location and operating lease costs, along with recruitment efforts to support expanding operations, drove expenses higher in Q1.
Nebius spent about $2.5 billion in the first quarter alone, primarily on graphics processing units (GPUs) and GPU-related hardware for its data center expansions. That's why investors should remain wary of Nebius stock at its recent level.
The company will need to continue investing to meet demand, as customers have announced their intention to secure its cloud capacity at an increasing rate. With the stock trading at about 14 times forward sales, the share price could easily be stagnant for some time. Any sign that customers might pull back plans to use Nebius' cloud infrastructure would surely hit the stock, too.
Long-term investors could reasonably add shares at recent levels, but they shouldn't be surprised if the stock swings wildly in the near term.
Howard Smith has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.